Aryzta deeper into U.S. baking with acquisitions
June 8, 2010
by Eric Schroeder
ZURICH, SWITZERLAND — Aryzta AG has acquired Fresh Start Bakeries and Great Kitchens for a combined $1.08 billion in two separate transactions that are expected to double the Swiss-based company’s manufactured volumes.
“From a business perspective we will operate with a greater geographic footprint and with much better channel access to consumers,” Owen Killian, chief executive officer of Aryzta, said of the newly acquired businesses. “These acquisitions double our manufactured volumes with an additional 30 production locations in 9 countries.”
Aryzta paid $900 million for Brea, Calif.-based Fresh Start Bakeries. Fresh Start is a global supplier of specialty bakery products with a leading position in the quick-service restaurant segment. The company operates 29 specialty production facilities across the United States, Canada, Germany, Poland, Sweden, Spain, Brazil, Australia and New Zealand. The company also has three joint ventures located in North America, Chile and Guatemala.
The company that today is Fresh Start was established in the early 1960s by Harold Freund, president of Freund Baking Co. in Glendale, Calif., and a fourth-generation baker. The original plant supplied McDonald’s restaurants in Southern California, and a second plant was built in 1969 to supply McDonald’s in northern California.
The company expanded through the 1970s, and in 1982 Craig Olson was named president of the company, which took the name Fresh Start Bakeries, Inc. In addition to baking plants in California and Hawaii (added in 1974), Fresh Start built a hamburger bun baking plant in Kansas City, Kas., in 1984. The company began opening plants outside the United States in 1988, with facilities in Germany and Brazil.
Additional baking capacity was added with a joint venture in the 1990s, building two plants in Tennessee, one in Dickson and the second in Nashville. In 2003, Fresh Start partnered with Galasso’s Bakery, in the construction of a 110,000 square foot California plant with five production lines baking more than 200 different products daily, mostly French bread, sourdough bread, sliced bread, rolls, buns and specialty bread products.
A significant departure from the company’s bun-centric roots was the 2006 acquisition of Pennant Foods, which is based in Northlake, Ill. The company supplies bakery products to restaurant chains, in-store bakeries in supermarkets and other retailers, as well as to food service companies. Its products include muffin batters, cookie dough, icing, puff pastry and croissants. At the time of the 2006 acquisition, Pennant customers included Subway, Dunkin’ Donuts, Ahold, Kroger, Supervalu, Sysco and Starbucks.
In 2009, Pennant acquired the frozen dough manufacturing business of General Mills, Inc., with facilities located in Bakersfield, Calif.; Hazleton, Pa.; Vinita, Okla.; and Montreal.
Fresh Start’s most recent baking acquisition was in 2007, with the purchase of Sweet Life, a cookie and sweets bakery in Santa Ana, Calif.
Great Kitchens, Inc., Romeoville, Ill., was acquired by Aryzta for $180 million. The company is the largest manufacturer of Take & Bake pizzas and supplies pizza and appetizers with a focus on the deli segment in the North American retail grocery channel.
Fresh Start Bakeries and Great Kitchens have combined annual revenue of $1.03 billion, with EBITDA of approximately $133 million. The transactions are expected to be accretive to earnings in excess of 45c per share over 12 months.
“(The transactions) result in the group maintaining a more balanced exposure to the core markets of North America and Europe, while extending its geographical footprint in the rapidly expanding rest of world segment,” Aryzta said. “Meanwhile, greater diversification in terms of customer mix enhances the defensive characteristics of the group’s business model.”
In addition to Fresh Start and Great Kitchens, Arzyta’s main U.S. brands are Otis Spunkmeyer and La Brea Bakery. The company also sells freshly baked bread and pastries under the Delice de France and Cuisine de France brands in Europe.
In a third-quarter trading update issued along with the acquisition announcement, Aryzta said like-for-like sales in its Food North America unit fell 5.4% to €135.6 million ($161.7 million) in the quarter ended April 30. Overall, total sales at Aryzta fell 6.1% to €822.9 million ($981.8 million).
“Food North America experienced the impact of continued weak economic conditions across most channels compared with prior year,” Aryzta said. “However, a continued focus by customers on value propositions is driving consumer footfall and creating an environment to stimulate revenue growth. The implementation of SAP ERP in Otis Spunkmeyer is progressing to plan and this initiative has now been extended to La Brea Bakery.”